Saudi Arabia is redirecting part of its oil supplies to the Yanbu port on the Red Sea, offering long-term customers a new route due to the potential for a prolonged blockade of the Hormuz Strait. This move helps reduce the risks of disruptions in energy deliveries to key consumers.
This is reported by Finway
Export Restrictions and Market Reaction
According to traders who received relevant notifications from the state company Saudi Aramco, buyers may receive only a portion of the planned volumes due to pipeline capacity restrictions to Yanbu. An alternative for importers remains the route through the Persian Gulf; however, it is still at risk of complete closure in the event of further escalation of the conflict.
“Saudi Arabia is providing long-term oil customers with the opportunity to receive their April supplies through the Yanbu port on the Red Sea, preparing for prolonged supply disruptions in the Hormuz Strait.”
Saudi Aramco, the world’s largest oil exporter, was unloading up to 7.2 million barrels of crude oil daily before the blockade of the Hormuz Strait by Iran, primarily from the Ras Tanura and Juaymah terminals in the Persian Gulf. The pipeline that runs across the country to the Red Sea has a capacity of 5 million barrels per day; however, the Yanbu port can accommodate smaller volumes.
Impact on the Asian Market and Position of Global Players
Saudi Arabia traditionally sells the majority of its oil under long-term contracts, with most exports directed to Asia. In response to the restrictions, the largest Chinese refiner Sinopec has reduced processing by 10% to mitigate the shortfall, and Japan has begun using its strategic oil reserves.
Traders note that if the conflict continues, oil traveling through Yanbu to Asia will most likely be sold on delivery terms, with logistics managed by Aramco. This only concerns the Arab Light grade. The Saudi producer has also for the first time offered supplies from Yanbu through spot tenders, and now under contract terms.
Prolonged uncertainty in the Middle East and the active stance of the U.S. administration, which is engaging partners to patrol the Hormuz Strait to ensure maritime security, are affecting global oil prices, which continue to rise despite the easing of sanctions against Russia.